What is an installment payment? How to implement it in your business?

Payment in installments is a flexible way of financing purchases that more and more consumers in Latin America prefer.

What is payment in installments?

Payment in installments or payment in installments allows consumers to make purchases and pay for them in several monthly installments over a given period of time.

This payment method is especially useful for high-value purchases, as it allows you to spread the cost over time rather than making a single payment. 

How does payment by installments work?

The installment payment procedure consists of the following steps:

• Selection of payment option: the consumer chooses to pay in installments when making a purchase, either by credit card, debit card or platforms such as Mercado Pago.
• Assessment of the consumer 's ability to pay: the merchant or financial institution assesses the consumer's ability to pay based on his or her credit line, bank account, history or use of a personal loan.
• Approval and conditions: the customer is informed about how many installments he can choose and under what conditions:
  
  • Interest-free installments: the consumer pays only the value of the product, the total price being equivalent to the total amount of the purchase. These installments are usually part of promotional installment plans absorbed by the retailer.
  • Interest-bearing installments: in this case, an interest rate such as the annual nominal rate (APR) or the annual effective rate (AER) is applied, which increases the total financial cost. This rate may be regulated by the Central Bank of each country, especially in the context of inflation.
  • Associated costs: in addition to interest, other charges may be added for late payments or early cancellation of the total amount.
• Payment of the first installment: the first payment is made, and then the following payments are automatically debited as agreed.
• Example: if a customer wants to buy an online course costing $600, he can choose to pay for it in 6 monthly installments of $100 without interest. On the other hand, if he chooses a plan with 30% annual interest, the total amount to be paid could reach $660, divided into 6 installments of $110.

Difference between fixed and interest-free installments

When is it convenient to offer installment payments in your business?

Offering installment payments makes sense when the price of what you sell exceeds what many customers can afford to pay at once. It is especially useful if you market high-value products or services, such as technology, training or travel.

It is also a good strategy if your audience is looking for flexibility, if you sell online (where integrating fees is simple) or if you need to differentiate yourself from the competition. On key dates, such as commercial campaigns or launches, it can help you close more sales and increase the average ticket.

Benefits of payment in installments

For retailers

• Increased sales: offering quotas expands the range of viable products for the customer.
• Loyalty and conversion: offering flexible payment options can improve customer loyalty.
• Stable revenue stream: receiving regular payments makes it easier to plan business operations.

For consumers

• Access to high value products: allows access to a larger amount of money for large purchases without having to pay the full amount at once.
• Better management of personal finances: spreading the cost over time helps to better plan expenses without neglecting other commitments.
• Building credit history: meeting payments strengthens the profile with entities such as banks or financing platforms.

Key considerations when offering or choosing payment in installments

For retailers

• Appropriate payment solution: have a secure and functional integration (for example, with Mercado Pago or Rebill).
• Available installment plans: decide whether to offer 3, 6 or 12 installments with or without interest and know the impact on cash flow.
• Associated costs: transaction fees, absorbed interest or implementation costs.

For consumers

• APR and AER: understanding the difference between the nominal annual rate and the effective annual rate helps to measure the impact of interest.
• How many installments to choose: sometimes it is better to pay in fewer installments to reduce the total financial cost.
• Payment capacity and budget: evaluate whether the plan can be sustained in the medium or long term.

Offer installment payments in your business with Rebill

If you are looking for a payment gateway in Latin America to expand your business and want to offer your customers the flexibility of payment in installments, Rebill is your ideal partner.

Advantages of choosing Rebill for your installment payments

• Transparent rates, with no hidden costs or minimum fees.
• Personalized human assistance to solve any doubt.
• Facilitation of cross-border payments, ideal for startups and global companies.
• Various payment methods: credit and debit cards, e-wallets, wire transfers, cash and more.
• Expansion throughout the LATAM region without the need to establish a legal presence in each country.
• Fast and efficient integration with friendly APIs and SDKs

Ready to get paid in installments? Contact us today to start simplifying your installment payments and grow your business in Latin America.